Anticompetitive unilateral conduct

Abuse of dominance

In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market power?

Section 2 of the Sherman Act does not prohibit the mere possession of monopoly or market power or the acquisition of such power through lawful competition on the merits. Rather, it prohibits the acquisition, attempted acquisition or maintenance of such power through exclusionary conduct. As an example, vertical restrictions that limit competitors’ access to supplies or customers, such as exclusive dealing, tying, or loyalty or bundled discounts, may violate section 2. Other types of conduct that have been deemed predatory or exclusionary include predatory (below-cost) pricing, engaging in baseless litigation for an anticompetitive purpose, abusing an industry standard-setting process (eg, by influencing an association to adopt a standard that is designed to suppress competition) and, in rare cases, refusing to deal with a competitor. In the pharmaceutical context, the refusal by a branded manufacturer to supply samples of drugs covered by a restrictive distribution programme mandated by the Food and Drug Administration (FDA) has been subject to attack as unlawful refusal to deal (see, eg, Mylan Pharmaceuticals Inc v Celgene Corporation, No. 2-14-cv-02094 (3rd Cir 27 February 2015)), and is now the subject of the 2019 Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act.

In January 2017, Mallinckrodt ARD Inc (Mallinckrodt) and its parent company, Mallinckrodt plc, agreed to pay US$100 million to settle charges by the Federal Trade Commission (FTC) and five states that Mallinckrodt illegally maintained its monopoly of Acthar, a specialty drug used to treat a rare seizure disorder affecting infants. According to the FTC, Mallinckrodt violated US antitrust laws when its Questcor division illegally acquired the US rights to develop Synacthen, a drug that threatened Mallinckrodt’s existing monopoly in the US market for adrenocorticotropic hormone (ACTH) drugs used to treat infantile seizures. The FTC charged that Mallinckrodt had taken advantage of its monopoly in the market for ACTH drugs by raising the price from US$40 per vial in 2001 to more than US$34,000 per vial today. According to the complaint, Mallinckrodt felt threatened that a competitor would obtain the US rights to Synacthen, a competing drug used in Europe and Canada to treat infantile seizures. To maintain its monopoly, Mallinckrodt allegedly outbid several competitors to obtain the US rights to Synacthen from Novartis AG. In addition to the US$100 million fine, Mallinckrodt agreed to grant a licence to develop Synacthen to a licensee approved by the FTC (see In the Matter of Mallinckrodt ARD Inc, Complaint for Injunctive and Other Equitable Relief, FTC File No. 131-0172).

De minimis thresholds

Is there any de minimis threshold for a conduct to be found abusive?

US antitrust law does not recognise a claim for abuse of dominant position like that under article 102 of the Treaty on the Functioning of the European Union. The closest analogue under US law is section 2 of the Sherman Act, which prohibits actual and attempted monopolisation (and conspiracies to monopolise). While section 2 claims may require a showing of monopoly power (which can involve assessments of market share), there is no bright-line de minimis threshold that exempts conduct based on the size of the market, the duration of the conduct or the number of customers. All of those factors, however, may be relevant to determining whether alleged exclusionary or anticompetitive conduct actually had a sufficiently adverse effect on competition.

Market definition

Do antitrust authorities approach market definition in the context of unilateral conduct in the same way as in mergers? If not, what are the main differences and what justifies them?

Unilateral conduct cases in the US are generally brought under section 2 of the Sherman Act. To prove a section 2 claim, plaintiffs have the burden to show that the defendant possessed monopoly power (for an actual monopolisation claim) or a ‘dangerous probability of achieving’ monopoly power (for an attempted monopolisation claim). Both inquiries generally require the plaintiff to allege and ultimately prove a relevant market that is (or is likely to be) monopolised. See Broadcom Corp v Qualcomm Inc, 501 F3d 297 (3d Cir 2007), although there are rare cases in which market or monopoly power can be demonstrated using direct evidence. See, for example, McWane, Inc v FTC, 783 F3d 814, 830 (11th Cir 2015) (noting that the FTC had presented sufficient evidence of monopoly power, including through direct evidence of party’s ‘ability to control prices’ in the market).

‘Market definition is a deeply fact-intensive inquiry’ (United States v Am Express Co, 838 F3d 179, 196 (2d Cir 2016)), but the general approach to market definition in merger and unilateral conduct cases is generally similar. As in merger cases, the key question with respect to market definition in unilateral conduct cases is what alternatives customers could turn to in the face of an attempted price increase or other anticompetitive conduct by the alleged monopolist (as opposed to the combined merging entities in a merger case). Answering this question generally involves analysing which products are ‘reasonably interchangeable by consumers for the same purposes’ (see Sharif Pharmacy, Inc v Prime Therapeutics, LLC, 950 F.3d 911 (7th Cir 2020); Flovac, Inc v Airvac, Inc, 817 F3d 849, 854 (1st Cir 2016)). As noted above, however, in unilateral conduct cases there are rare instances in which monopoly power can be proven with direct evidence.

Establishing dominance

When is a party likely to be considered dominant or jointly dominant? Can a patent owner be dominant simply on account of the patent that it owns?

A party is likely to be considered dominant – that is, to have monopoly power – when it has the ability to control prices or exclude competition in a relevant market. Courts frequently use a party’s market share in a relevant market as a proxy for assessing whether that party has market power, but plaintiffs may also point to structural features of the market such as high barriers for new entry (Broadcom Corp v Qualcomm Inc, 501 F3d 297, 317 (3d Cir 2007)). No bright-line rules exist for what constitutes monopoly power under US law, but most successful monopolisation claims involve market shares of at least 70 per cent. To succeed on a claim for ‘attempted monopolisation’, the plaintiff must show that the defendant has a ‘dangerous probability’ of obtaining monopoly power, which generally requires a market share of at least 50 per cent. US antitrust law does not recognise joint dominance of a market in section 2 cases.

The existence of a patent, by itself, is generally not enough to demonstrate market power (see Illinois Tool Works Inc v Indep Ink, Inc, 547 US 28 (2006)). As a general rule, patent owners enforcing their patents will not violate the antitrust laws, and there is no affirmative obligation to license patents to particular licensees. Merely holding a patent, however, does not immunise the patent holder from the antitrust laws. Patent holders may violate the Sherman Act, however, if they exercise their right to exclude beyond the scope of the patent in an attempt to reduce competition in other markets. Likewise, plaintiffs may bring antitrust cases on the theory that patent holders are unduly leveraging their patents to harm competition.

IP rights

To what extent can an application for the grant or enforcement of a patent or any other IP right (SPC, etc) expose the patent owner to liability for an antitrust violation?

Application for the grant of a patent does not, by itself, expose the patent owner to antitrust liability. Enforcement of a fraudulently obtained patent, however, may violate section 2 of the Sherman Act if used to exclude lawful competition from the market (see Walker Process Equipment Inc v Food Machinery & Chemical Corp, 382 US 172 (1965); Ragner Technology Corp v Berardi, 324 F.Supp.3d 491 (DNJ 2018) (discussing the requirements for a Walker Process claim).

In addition to enforcement of a fraudulently obtained patent, a patent owner can be liable for an antitrust violation if it pursues patent litigation with no reasonable chance of success, solely to cause direct harm to the competitor’s business as a result of the litigation process. The FTC has also taken the position that the refusal of brand-name pharmaceutical companies to sell samples of their products to generic companies for bioequivalence studies in situations where FDA-imposed distribution restrictions have prevented the generic company from making use of alternative channels to acquire such samples can constitute exclusionary conduct (see the FTC’s brief as amicus curiae in Mylan Pharmaceuticals Inc v Celgene Corporation, Case No. 2:14-CV-2094 (DNJ 17 June 2014)). In its brief, the FTC argued that Celgene’s choice as to with whom it does business was not absolutely shielded from claims like Mylan’s. Generic manufacturers often seek these samples from brand-name pharmaceutical companies because they may be necessary to obtain regulatory approval for a generic product. In February 2015, the Third Circuit declined to reverse the district court decision allowing the case to proceed (see Mylan Pharmaceuticals Inc v Celgene Corporation, No. 2-14-cv-02094 (3d Cir 27 February 2015)). As of December 2019, the CREATES Act requires the sale of product samples to generic manufacturers regardless of the patent status of the drug.

When would life-cycle management strategies expose a patent owner to antitrust liability?

Manufacturers whose branded products are coming off-patent often seek to improve their products, patent the improvement and move their customers to the improved products. There have been several antitrust challenges to this type of conduct, sometimes referred to as product hopping, where it has been alleged that the new drug did not reflect any real improvements and was solely used as an effort to thwart generic competition. In 2015, the Second Circuit became the first circuit court to address product hopping when it affirmed a preliminary injunction against Actavis plc (formerly Forest Laboratories). The Second Circuit held that Actavis’ withdrawal of Namenda IR, a twice-daily drug for the treatment of Alzheimer’s disease, and subsequent introduction of extended release Namenda XR, violated the antitrust laws because Actavis effectively engaged in a scheme to coerce patients to switch from the old product to the newer one. The court also indicated, however, that it likely would have been lawful for Actavis to keep the original product on the market while working to persuade customers to switch to the new extended release version (see New York v Actavis plc, No. 14-4624 (2d Cir 22 May 2015)).

The law on product hopping, however, remains unsettled. In contrast with the Second Circuit’s decision in the case involving Namenda, the Third Circuit affirmed dismissal of a product hopping case involving the drug Doryx (see Mylan Pharm Inc v Warner Chilcott Pub Ltd Co, 838 F3d 421, 437 (3d Cir 2016)).

Patent owners also may be subject to antitrust scrutiny for improperly listing patents in the Orange Book as a means to extend exclusivity and thereby impede generic competition (eg, In the Matter of Bristol-Myers Squibb Co, Docket No. C-4076 (2003), Similarly, drug manufacturers can be subject to antitrust liability for filing a citizen petition with the FDA that is intended solely to delay or prevent competition with the drug and is not based on a reasonable chance of success (see FTC v Shire ViroPharma, Inc,917 F.3d 147, n.10 (3d Cir 2019) (noting the District Court’s explanation that the allegations were sufficient to invoke the sham petitioning exception to the Noerr-Pennington defence and confer antitrust liability, but ultimately dismissed on other grounds).


Can communications or recommendations aimed at the public, HCPs or health authorities trigger antitrust liability?

It is generally lawful to make public statements about one’s independent business conduct. The concern from an antitrust perspective is whether communications can be interpreted as facilitating or encouraging an express or implicit agreement among competitors. The key question is not whether the statement is public or private, but whether the communication can be construed as a ‘signal’ to another party about a potential agreement.

As a general rule, truthful and non-misleading commercial speech is likely be protected under the First Amendment. Where claims about a competitor’s product are false or misleading, however, it is possible that such claims could lead to antitrust liability. In ongoing antitrust litigation in the single-serve coffee pod market, plaintiffs claim that Keurig Green Mountain Inc (Keurig) discouraged customers from buying its competitors’ coffee pods by falsely claiming that the competitors’ pods would cause Keurig machines to fail.

Importantly, plaintiffs claim that Keurig’s alleged false statements are just one component of a larger anticompetitive scheme. In addition to the alleged false statements, plaintiffs claim that Keurig forced distributors to enter into exclusive agreements and filed baseless patent infringement lawsuits against competitors. The district judge found that such conduct could constitute a section 2 antitrust violation and allowed discovery to proceed to substantiate the disparagement claims (see In re Keurig Green Mountain Single-Serve Coffee Antitrust Litig, 1:14-md 2542 (SDNY, 3 April 2019).

Authorised generics

Can a patent owner market or license its drug as an authorised generic, or allow a third party to do so, before the expiry of the patent protection on the drug concerned, to gain a head start on the competition?

Patent owners may launch an authorised generic (or license a third party to market an authorised generic) prior to patent expiration without violating the antitrust laws. Conversely, a promise by the patent holder not to launch an authorised generic, in the context of a patent settlement, may give construed as an unlawful reverse payment to the generic drug manufacturer. For example, in June 2015, the Third Circuit adopted the FTC’s position that a commitment not to launch an authorised generic may be a reverse payment under Actavis (In re Lamictal, No. 14-1243). In November 2016, the Supreme Court declined to hear the defendants’ appeal of the Third Circuit’s ruling (King Drug Co of Florence, Inc v SmithKline Beecham Corp, 791 F3d 388 (3d Cir 2015), cert denied, 137 SCt 446 (2016)).

Restrictions on off-label use

Can actions taken by a patent owner to limit off-label use trigger antitrust liability?

The Federal Food, Drug, and Cosmetic Act, which provides the framework for US pharmaceutical regulation, does not explicitly prohibit off-label promotion but permits the FDA to regulate manufacturers’ marketing and branding of drugs, and prohibit the introduction of new, unapproved drugs. The FDA traditionally has used this regulatory authority to prohibit off-label promotion.

Using an FDA-approved drug for off-label use is not unlawful under US law, nor is it unlawful for an HCP to prescribe a drug for off-label use. In 2017, Arizona passed a law allowing drug makers to promote their products for off-label use, as long as the information provided is truthful. Tennessee soon followed and passed its own version of the law. Legislators in Colorado, Mississippi and Missouri introduced similar bills for 2018. However, even in such states, a pharmaceutical company’s promotional efforts remain subject to regulation by the FDA, which, as noted above, has generally prohibited off-label promotion.

Under certain circumstances, misleading or false statements made by pharmaceutical companies regarding off-label or any other use, however, could potentially give rise to antitrust liability.


When does pricing conduct raise antitrust risks? Can high prices be abusive?

US antitrust law does not impose antitrust liability based solely on charging high prices for drugs. Outside of the antitrust context, there may be state laws that impose restrictions on ‘price gouging’ under certain circumstances.

Pricing conduct can give rise to antitrust liability if a firm agrees with a competitor to raise, lower, stabilise or otherwise fix prices in violation of section 1 of the Sherman Act, or when a monopolist engages in predatory pricing in violation of section 2 of the Sherman Act.

Sector-specific issues

To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?

Except in the case of a per se unlawful agreement between competitors (eg, price-fixing or market allocation), courts evaluating antitrust claims typically place significant weight on a defendant’s pro-competitive justifications for its conduct. Thus, conduct that improves products available to consumers (such as by increasing the safety or efficacy of drugs or making it easier for patients to comply with drug regimens) may help rebut any allegation that a company’s conduct should be considered unlawful under the antitrust laws. Such justifications, however, will be weighed against possible anticompetitive effects and the existence of less restrictive alternatives. Additionally, when analysing antitrust issues, US courts keep in mind the regulated nature of the pharmaceutical sector and the economic importance of patent protection and generic substitution.

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12 May 2020.